The Financial Services Authority has fined a London-based insurance firm £3.3 million and banned its former chairman from pratice over serious shortcomings in corporate governance that included a failure to implement an IT administration system.

Mitsui Sumitomo Insurance Company Europe Ltd. (MSIEu) is a division of one of the world's largest non-life insurance firms. In 2007, it decided to offer insurance services to non-Japanese clients, at which point the FSA warned the company that its corporate governance practices were not up to the standard required by UK regulations.

"This change in strategy will require careful and focused oversight from the board to maintain its success," the FSA warned at the time. "A key factor is the new underwriting and general ledger system (PAS) being implemented during 2008/2009. It is important that the board is supplied with management information on the new business venture that is of the quality and quantity to enable it to discharge its apportionment and oversight role effectively.”

By 2010, however, there were signs that the company had failed to implement the appropriate management oversight, including the failure "to implement in a timely manner effective IT systems and generate adequate management information to enable it to control business written in its branches."

From the period of December 2010 to March 2011, it did not have sufficient capital to meet its 'Individual Capital Guidance', the amount of money the FSA decides a firm should hold in reserves. It also failed to ensure appropriate segregation of duties, and that positions were filled with employees with sufficient experience.

"The FSA regards these failings as serious," the regulator ruled yesterday. "The weaknesses at MSIEu posed risks to policy holders and as such had the potential to impact market confidence."

Former executive chairman Yohichi Kumagai was held responsible for the firm's corporate governance failings. The FSA higlighted his failure "to ensure that the … underwriting and claims IT system was implemented effectively and in a timely manner, and that other information systems operated effectively, with the result that senior management was not provided with information of sufficient quality to effectively control the business."

"Mr Kumagai was aware that implementation of this system was identified in June 2009 as a key factor in providing management with adequate data to oversee and control the growing branch business." it said. "Without such a system, MSIEu was unable to efficiently generate financial data that was required to control the business."

The FSA's report reveals that the group CFO had noticed several issues with IT project, including "a reticence by members of staff regarding its implementation, inefficient cash matching and slow response times". It quotes a independent non-executive director at the firm as saying that "no matter how many times the issues were mentioned at a board meeting, nothing appeared to happen. It needed to be solved".

The regulator fined Kumagai £170,433 and banned him from practice. "Mr Kumagai lacks competence and capability to perform a significant influence function, and therefore that he is not fit and proper to perform such a function in relation to any regulated activity carried on by any authorised or exempt persons, or exempt professional firm."

It fined MSIEu £3.3 million. Both fines were reduced by 30% as the firm has instigated its own investigation, and co-operated with the FSA's enquiry.